Vista International Technologies, Inc. (VVIT) - Description of business

• tire derived fuel processing providing an alternative fuel supply from waste tires.

Nathaniel Energy has been in the tire derived fuel (TDF) processing business since 1997 and has operated a 27 acre TDF processing facility in Hutchins, Texas since 1999. The TDF facility shreds whole passenger tires into 1½ inch and smaller "chips" for use as fuel in various industrial processes. In 2006, our facility processed a total of 15,075 tons, approximately 1,507,524 passenger car tires, into 14,168 tons of TDF for sale to industrial customers including cement kilns and paper processors. Our future plans call for a portion of the TDF produced annually to be used to augment and support commercialization of the Thermal Gasifier EfW business.

Former Helium and Natural Gas Processing Operations

Nathaniel Energy also owned and operated a helium and gas processing facility in Keyes, from April 2003 until we sold these assets and operations to Midstream Energy Services, LLC on March 7, 2006. At the closing of the sale, giving effect to finally determined adjustments, Midstream delivered $16,915,676 to Nathaniel on account of the purchase price. Upward adjustments to the purchase price in the amount of $83,893 as part of post-closing determination pursuant to the procedures in the Purchase and Sales Agreement were resolved as of August 2, 2006. Midstream assumed all the liabilities under the contracts included in the gas assets being sold that arose after the closing date. At the time of this filing, management believes we have successfully resolved any existing disputes relating to this transaction and there are currently no issues outstanding.

Following settlement with Midstream, Nathaniel used $14,482,171 of the sale proceeds to satisfy its indebtedness, including accrued interest, to Richard Strain, which reduced the company's debt by approximately 89%. (See Part III Item 12 Certain Relationships and Related Party Transactions for further discussion about the transaction with Mr. Strain). In addition, on June 9, 2006, $800,109 of the sale proceeds was used to retire a line-of-credit secured by Mr. Strain.

Technology

Nathaniel Energy's proprietary patented technology, the Thermal Gasifier, is a two-stage gasification system designed to efficiently convert "waste" materials from industrial, residential and agricultural sources into clean economical energy while exceeding the most stringent Environmental Protection Agency (EPA) and European Union (EU) emission standards.

The Nathaniel Energy Thermal Gasifier is a closed, continuous flow, two-stage gasification module. The Thermal Gasifier is designed to efficiently convert hydrocarbon feedstock containing solids such as used tires or tire-derived fuel (TDF), municipal and industrial solid waste streams (MSW) also known as refuse-derived-fuel (RDF), municipal sewage sludge solids (MSSS), wood waste, and agricultural waste to a synthesis gas comprised primarily of hydrogen, carbon monoxide, carbon dioxide and residual ash (approximately 10% by weight of the feedstock on average) by a process called gasification.

Most of these feedstocks require some preparation for use as fuel, such as shredding, blending, densifying and pelletizing, to ensure proper gasification. Following preparation, the fuel pellets or chips are fed into the Thermal Gasifier using a system of weigh belts and air locks to ensure an accurately metered supply of fuel is introduced while preventing the introduction of atmospheric air. The fuel is distributed on a moving belt which passes through a high temperature, oxygen starved environment. It is during this stage the solids break down into a synthesis gas, or SynGas, which is then drawn off to a separate chamber to be fully oxidized (combusted) at temperatures at or above 3,000° fahrenheit. The oxidation process produces tremendous heat, elemental carbon, carbon dioxide and low levels of carbon monoxide, sulfur dioxide, and nitrogen oxides.

The Thermal Gasifier gasification process generates ash in two forms. The first, bottom ash, is the unburnable solids and possible contaminants remaining from the fuel, such as the spent carbon, metal, glass, rock and sand. The second, fly ash, is comprised of small particulates suspended and entrained in the exhaust gas stream which are captured and removed using industrial cyclones and filters prior to discharge.

The Thermal Gasifier two-stage gasification and oxidation process is designed to efficiently recover the greatest percentage of available energy possible while generating very small quantities of environmental pollutants. The Thermal Gasifier's high temperatures destroy 99.9% of hazardous air pollutants emitted from refuse-derived-fuel and tire-derived-fuel including polychlorinated biphenyls (PCBs), dioxins, and furans. Most remaining gaseous pollutants are captured by scrubbers, catalytic reduction, or other pollution control equipment with the remaining pollutants falling well below EPA and EU limits.

The Process Control System (PCS), the "brain" of the Thermal Gasifier, closely monitors and modulates all aspects of the gasification and oxidation reactions by metering fuel, introduced air and residence time to optimize energy recovery efficiency. The PCS automates the Thermal Gasifier system reducing the manpower needed to supervise operation. The PCS features automated self-diagnostics and corrective action functions which prompt the operator to take a specified action if a problem occurs beyond the ability of the PCS to correct. In addition, the PCS' predictive failure analysis function identifies potential points and modes of failure prior to any actual problem so preventative maintenance can be done before a more costly failure occurs.

Environmental Testing

In May 2000, Bord na Mona Environmental Limited, a Republic of Ireland-based environmental management company working independently on behalf of Nathaniel Energy, conducted a comprehensive environmental test on the Thermal Gasifier as part of a demonstration in Dundalk, County Louth, Republic of Ireland. The test, using RDF as fuel, targeted more than 50 chemical species pollutants of concern including dioxins, furans, chlorophenols, chlorobenzenes, polycyclic aromatic hydrocarbons (PAH) and polychlorinated biphenyls (PCBs). Bord na Mona concluded the Thermal Gasifier met and surpassed existing and, at that time, pending EU directive limits for all pollutants of concern. Management believes it significant that independent testing verified the efficacy of the Thermal Gasifier and confirmed the technology produces pollutant emissions significantly below allowable EU limits. In all cases, pollutants of concern were detected at less than 10% of standard with many compounds below the technical ability to detect.

Products, Byproducts and Services

Nathaniel Energy provides valuable marketable services and produces or will produce numerous marketable products and byproducts through our Thermal Gasifier operations and our TDF processing operations.

Thermal Gasifier

The Nathaniel Energy Corporation Thermal Gasifier is at the core of our business plan, anchoring our business philosophy as well as our business development model as we build the company toward our goal of becoming a renewable energy business leader.

During 2006, we continued consultation with the project owners of the energy-from-waste plant in Cologna-Ventura, Italy regarding modification and upgrade of the two Thermal Gasifiers located at the plant and potential operational changes to increase plant output and reliability. These discussions are still ongoing. While we did not materially participate in this project during 2006, we have continued to use the performance of the two Thermal Gasifiers as commercial "proof-of-process" in our ongoing business development activities. We did not realize any revenue from this project during 2006.

In addition to utilizing the Thermal Gasifiers in Cologna-Veneta as commercial "proof-of-process," we have used the considerable hands-on engineering and operational experience gained during project design, fabrication, construction and startup to advance the technology state-of-the-art. 2006 saw dramatic advances in the design of the next generation Thermal Gasifier as we continue to increase the energy efficiency and cost-effectiveness of the technology. Future production models will be able to use more types of fuel with greater variability in quality while still producing useable energy at a greater net profit.

The Thermal Gasifier technology is uniquely suited for the renewable energy and especially the EfW business segment. Because it is a truly multi-fuel system, we enjoy tremendous flexibility in its application. In addition, the Thermal Gasifier generates multiple beneficial use products and byproducts.

Products include:

• Heat - produced during gasification production, and oxidation/combustion of synthesis gas. This heat is available for use in heating and cooling of adjacent buildings or for generation of steam.

• Electricity - generated through addition of gas turbine generator, boiler and steam turbine generator, or integrated combined cycle generator, to the Thermal Gasifier. Electricity is available for use on-site or sale on the electrical grid.

• Synthesis Gas (SynGas) - produced through gasification of hydrocarbon containing solids, is a combination of carbon monoxide and hydrogen. SynGas may be used as a raw material to make liquid transportation fuels through a variety of processes, as a substitute for natural gas, or to generate heat, steam or electricity. In addition, the hydrogen can be separated for use in fuel cells or in chemical processes.

Byproducts include:

• Carbon black - High purity carbon black is produced during gasification and oxidation/combustion of TDF and/or petroleum coke. Carbon black can be sold as a high value raw material for tire manufacturing, water filtration, electronics manufacturing, production of inks and toners, radar-absorbing paints, cosmetics and construction materials.

• Carbon dioxide - produced during gasification and oxidation/combustion of hydrocarbon containing feedstock. Carbon dioxide can be used for environmental control and augmentation in greenhouses to enhance plant growth or for any industrial carbonation process. Carbon dioxide production from burning of fossil fuels and industrial processes has potentially been identified as a primary contributor to global warming. Processes considered "carbon neutral" or resulting in sequestration of produced carbon dioxide will help reduce the additive affects on global warming and may qualify for tax advantages.

• Sulfur Dioxide - produced during gasification and oxidation/combustion of sulfur containing fuels. Sulfur dioxide can be used to make gypsum or sulfuric acid.

• Nitrogen - produced during separation of oxygen from atmospheric air prior to gasification. At sea level, atmospheric air is comprised of approximately 78% nitrogen, 21% oxygen, less than 0.93% argon and trace quantities of carbon dioxide and other gases. The nitrogen can be sold for industrial or cryogenic uses including production of fertilizers.

• Bottom ash - produced during the gasification process, bottom ash is the solid inert remnant of the spent fuel. Bottom ash can be used as an aggregate for concrete, brick and/or road base.

Marketability of the individual products and byproducts depends upon local demand and our ability to further process and distribute them at competitive prices. We expect that these market demands will drive the configuration of the Thermal Gasifier in such a way as to maximize project profitability and will vary from location to location.

We believe the marketable products and byproducts of the Thermal Gasifier ideally suit us for locations in close proximity to a variety of industrial operations such as greenhouses, petroleum refineries, certain pipelines, chemical plants, printing plants, industrial parks, and designated "clean energy" generation sites. This is especially true for facilities located in climates with temperature extremes requiring heating and cooling of adjacent structures and co-generation of electricity.

During 2006 we generated no revenue from the sale of Thermal Gasifiers or from the sales of any products or byproducts generated by the operation of a Thermal Gasifier.

TDF Processing

Our TDF processing operation in Hutchins, Texas provides valuable services to industry, government and the local communities while simultaneously producing a marketable product. The facility is permitted by the Texas Commission on Environmental Quality (TCEQ) as a waste tire storage facility and as a used tire processor and recycler. We accept used passenger car tires as a waste product from businesses, governments, communities, and individuals for a "tipping fee" as a disposal charge. This service diverted more than 1,500,000 tires from landfills and illegal dumping in the Dallas, Texas area during 2006 alone.

The tires are processed immediately upon receipt through a continuous loop shredding system designed to reduce the tires to 1½ inch and smaller rubber chips, known as tire-derived-fuel (TDF). During this process, much of the steel belting from the tires is also recovered and may be reused in other industrial applications. Following processing, the TDF is temporarily stored on site awaiting transportation to the end user. During 2006, we produced 14,168 tons of TDF, 90% of which we sold to Energis, LLC, an alternative fuel buyer for Holcim, Inc., a major Dallas area cement producer who uses TDF as an alternative fuel in its cement kiln.

During 2006, we generated $1,114,887 in gross revenue from TDF processing operations with $352,499 generated from TDF sales and $762,388 generated from tipping fees, environmental consulting, cleanup and other sales. Our total cost of revenue for TDF processing operations during the same period was $1,150,815 resulting in a net $35,928 or 3.2% operating loss for 2006. TDF processing operations accounted for 100% of our total revenue during 2006.